FCA Competition Act investigation: Mastercard, Visa and PayPal digital wallet probe
In short: On 6 May 2026 the FCA opened a Competition Act 1998 investigation into Mastercard, Visa and PayPal. The FCA Competition Act investigation covers all three under Chapter I, and Mastercard and Visa under Chapter II for suspected abuse of dominance, over how Mastercard and Visa cards fund the PayPal digital wallet. The FCA is running the case under sections 234I to 234O of the Financial Services and Markets Act 2000, with concurrent CMA jurisdiction under section 54 of the Competition Act 1998. Scheme participants, acquirers, wallet operators and payment fintechs must preserve documents from the moment a section 26 notice arrives.
The Financial Conduct Authority is investigating Mastercard, Visa and PayPal for suspected breaches of UK competition law. On 6 May 2026 the agency opened formal investigations into all three firms under Chapter I of the Competition Act 1998, and into Mastercard and Visa under Chapter II for suspected abuse of dominance. The FCA is examining how Mastercard and Visa cards fund the PayPal digital wallet and how that funding routes through the schemes.
PayPal disclosed the probe in its Q1 2026 quarterly report on 5 May 2026; the FCA confirmed it the next day. The FCA has made no findings and is gathering evidence; it may or may not move to a statement of objections. The agency has put scheme rulebook clauses, no-steering and no-surcharge provisions, exclusivity terms and wallet integration agreements into live regulatory exposure for scheme participants, acquirers, digital wallet operators and payment fintechs.
The case so far
- The FCA opened Chapter I investigations into Mastercard, Visa and PayPal, and Chapter II investigations into Mastercard and Visa, on 6 May 2026. Source: FCA press release, 6 May 2026.
- The FCA is examining how Mastercard and Visa cards fund the PayPal digital wallet and how customers use it. Source: FCA press release, 6 May 2026.
- Sections 234I to 234O of the Financial Services and Markets Act 2000 hold the FCA’s concurrent competition jurisdiction; the Financial Services (Banking Reform) Act 2013 inserted them and they came into force on 1 April 2015. Source: FCA, Competition law powers.
- The procedural concurrency framework operates under section 54 of the Competition Act 1998 and the Competition Act 1998 (Concurrency) Regulations 2014 (SI 2014/536). Source: legislation.gov.uk.
- The FCA may require documents and information from any person under section 26 of the Competition Act 1998 from the moment it opens an investigation. Source: section 26 CA 1998.
The concurrency regime and the Competition Act 1998
The Chapter I prohibition in section 2 of the Competition Act 1998 catches agreements between undertakings, decisions by associations of undertakings and concerted practices that have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom. The Chapter II prohibition in section 18 catches the abuse of a dominant position. Chapter I has long caught card schemes as associations of undertakings whose collective decisions on pricing, access conditions and rule-making attract challenge: the United Kingdom multilateral interchange fee jurisprudence in Sainsbury’s Supermarkets Ltd v Visa Europe Services LLC [2020] UKSC 24 settled the framework.
Three regulators hold concurrent jurisdiction to apply the Chapters I and II prohibitions in financial services and payments markets. The CMA holds the general jurisdiction. FSMA 2000 sections 234I to 234O hold the FCA’s concurrent function in financial services markets; the Financial Services (Banking Reform) Act 2013 inserted them. Section 61 of the Banking Reform Act 2013 holds the PSR’s concurrent function in respect of participation in payment systems.
The Mastercard and Visa schemes are designated payment systems and PayPal funding flows through them, so the PSR could have taken this case under section 61. The FCA could take it under sections 234I to 234O. Section 54 of the Competition Act 1998 and the Concurrency Regulations 2014 govern allocation between regulators, require consultation before any case opens, and provide for a single lead. The FCA leads.
What the FCA Competition Act investigation covers
Chapter I reaches the contracts that link Mastercard, Visa and PayPal. Three categories of clause matter most. First, no-steering and no-surcharge restrictions in scheme rulebooks that stop the wallet favouring cheaper funding instruments or shaping the customer journey by cost of acceptance. Second, exclusivity, default-routing and preference clauses that push flow towards particular scheme rails inside the wallet. Third, interchange and scheme fee arrangements specific to wallet-funded transactions, where the post-Brexit retained Interchange Fee Regulation caps intra-UK consumer card rates but leaves the wider commercial perimeter open. The CAT MIF jurisprudence, including the Sainsbury’s UKSC zero-MIF counterfactual and the Court of Appeal’s restatement in Dune Group Ltd v Visa Europe Ltd [2022] EWCA Civ 1278, supplies the framing the FCA will read across.
Chapter II is narrower in legal form but broader in commercial reach. The FCA must first decide on the relevant market: wallet-level, which would put PayPal at the centre, or scheme-level, which would draw Mastercard and Visa each into dominance scrutiny on the funding side. Conduct types most likely to fall in scope include exclusionary tying of scheme acceptance to wallet support, refusal to supply on commercially equivalent terms, and margin squeeze where wallet integration imposes step-in fees out of proportion to the underlying processing cost. The FCA’s choice to name PayPal only under Chapter I, and not under Chapter II, reads as a position on the dominance question: the agency sees scheme-side dominance, not wallet-side dominance, as the live issue.
From the moment the FCA opens an investigation, it may issue notices under section 26 of the Competition Act 1998 requiring named persons to produce specified documents and to answer specified questions. Section 26 reaches third parties as well as the named addressees of the case, so acquirers, gateway providers, digital wallet operators and merchants whose contracts route through the same architecture should expect to receive them.
| Feature | Chapter I (section 2 CA 1998) | Chapter II (section 18 CA 1998) |
|---|---|---|
| Conduct caught | Agreements, decisions and concerted practices restricting competition | Abuse of a dominant position |
| Parties named | Mastercard, Visa, PayPal | Mastercard, Visa |
| Exemption available | Section 9 individual exemption (efficiency, indispensability, fair share, no elimination of competition) | None on the prohibition itself; objective justification at conduct stage |
| Maximum financial penalty | Up to 10 per cent of worldwide group turnover | Up to 10 per cent of worldwide group turnover |
| Information-gathering basis | Section 26 CA 1998 | Section 26 CA 1998 |
Implications for scheme participants and digital wallet operators
Exposure runs widest at tier two: acquirers and licensed scheme participants party to the rulebooks the FCA is reading. Three consequences follow.
The first is document preservation. Section 26 catches contemporaneous communications, board papers, internal pricing analyses and product development records that bear on the conduct under investigation. Firms should put a litigation-grade hold in place on the day the FCA draws them in.
The second is the contractual audit. Firms need to locate, map and assess scheme rulebook clauses, no-steering and no-surcharge provisions, exclusivity terms, default-routing rules and wallet integration agreements against the agency’s likely lines of enquiry.
The third is the engagement strategy. Firms can narrow section 26 responses by negotiation; voluntary information offers can shorten the case timeline; and constructive engagement with FCA case teams opens space for commitments under section 31A of the Competition Act 1998 if commitments become an option.
Tier three is the wider digital wallet, payment fintech and merchant base whose products route through the same architecture. Wallet operators competing with PayPal can now read how the FCA approaches the funding-instrument layer of wallet design, and the commercial space that may open for pro-competitive integration models. Payment fintechs whose product roadmaps assume default access to scheme rails see in the case the value of designing for portability across funding instruments and across scheme alternatives, including account-to-account routes. HM Treasury’s payments modernisation programme and the planned PSR/FCA consolidation sharpen that point: once the FCA absorbs the PSR’s payments competence, a single regulator will read commercial conduct in payment systems through a single lens.
Where the conduct meets consent and authorisation, the existing framework on payment consent under the PSRs 2017 remains the floor. The Chapter II analysis on wallet integration will draw on the same operational categories. Firms running parallel reviews of wallet integration terms and PSRs 2017 Regulation 67 consent flows will find the work overlaps materially.
Viewpoint
The FCA’s choice to lead this case, rather than the PSR, is the signal that matters. The PSR holds the dedicated payments competition mandate and the deeper sector knowledge of scheme rules and acquiring economics; its win in Mastercard v PSR [2026] EWHC 64 (Admin) confirmed the breadth of section 54 FSBRA general directions and the reach of concurrent competition powers to non-designated systems. The FCA leading on a card-schemes-and-wallets case points to the merged regime announced in HM Treasury’s Fintech Week 2026 package: once PSR functions move into the FCA, competition enforcement under the Competition Act 1998 will be the regulator’s primary lever for scheme-rule reform, not bespoke FSBRA general directions.
The operational bottleneck is rarely the headline interchange rate; it is the cluster of no-steering, default-routing and wallet-funding clauses sitting underneath the rulebook, and that is the cluster the FCA has now put on the table.
Frequently asked questions
What is the FCA Competition Act investigation about?
The FCA opened Chapter I investigations into Mastercard, Visa and PayPal on 6 May 2026, and Chapter II investigations into Mastercard and Visa, over how Mastercard and Visa cards fund the PayPal digital wallet and how customers use it. The agency is gathering evidence and has reached no findings.
Does the case reach scheme participants who are not named?
Yes, in two ways. Section 26 of the Competition Act 1998 lets the FCA require documents and information from any person, not only the addressees of the case. And the legal analysis the agency develops on scheme rulebook clauses applies to every participant on the same rulebook, not only the named firms. Acquirers, issuers, wallet operators and payment fintechs party to the rulebooks under examination should plan accordingly.
What information powers does the FCA have under the Competition Act 1998?
The FCA may issue written notices under section 26 of the Competition Act 1998 requiring named persons to produce specified documents and answer specified questions, with criminal sanctions for non-compliance and for destroying or falsifying documents. The FCA may also enter premises with or without a warrant under sections 27 to 28A. The agency exercises these powers in financial services markets through its concurrent jurisdiction in FSMA 2000 sections 234I to 234O.
How does the case interact with the planned PSR/FCA consolidation?
The FCA leading rather than the PSR signals where the merged regime is heading. The PSR could have taken the case under its concurrent competition powers in section 61 of the Financial Services (Banking Reform) Act 2013, which cover participation in designated payment systems. HM Treasury’s Fintech Week 2026 package confirmed the planned dissolution of the PSR and the transfer of its functions to the FCA, with primary legislation to follow. Until that happens, both regulators retain their existing competence. The FCA picking up the case rather than relying on PSR-led action reads as a regulator statement about the role competition law will play in the merged framework.
For advice on scheme rulebook exposure, document preservation under section 26, or wallet integration contract review against the FCA Competition Act investigation now under way, contact Rob Bratby at Bratby Law.
